The S&P 500 gained 0.5% to 2,102.44, after dropping as much as 0.6% this morning. Likewise, the Dow Jones Industrial Average rose 0.4% to 17,545.18 after falling 0.8%, and the Nasdaq Composite jumped 0.9% to 5,091.70 after declining as much as 0.5% earlier today.

The massive collapse in the Empire State manufacturing index to -14.9 in August, from +3.9, suggests that the factory sector is in a lot more trouble than previously thought. That said, before getting too carried away it’s worth noting that the six-month ahead index improved to a six-month high of +33.6, from +27.0. (When the current conditions index collapsed at the start of the Great Recession, the six-month ahead index fell sharply too.)

The details of the current conditions indices were equally as bad as the headline index. The new orders index collapsed to -15.7, from -3.5, the shipments index plunged to -13.8, from +7.9, and the inventories index dropped to -17.3, from -8.5.

A drop as big as this does suggest that the dollar’s appreciation and/or the slowdown in global economic growth is having a more marked impact on the manufacturing sector than previously thought. But these regional manufacturing surveys are notoriously volatile. So we would be cautious about reading too much into this collapse until it is verified by a corresponding decline in either the Philly Fed index (due out on Thursday) or the Markit manufacturing PMI (due out on Friday). As it stands now, this won’t prevent a September rate lift-off.

It’s not that often that you can look to the Beatles for a metaphor of the market, but the last six months of trading have clearly been a Nowhere market. The examples are numerous, and it seems that with each new day of going nowhere, the list grows longer. The latest example comes in the form of the trading range between the S&P 500’s closing high/low range over the last six months…in the last six months the S&P 500 has traded in a range of a mere 4.4%, which is narrower than any other six month range in the history of the index.

While the stock market was probably the last thing on the minds of John Lennon and the Beatles, it is a coincidence that right around the time Lennon wrote “Nowhere Man” in 1965, it was the stock market that was going nowhere. In fact, in early 1965 the S&P 500 was trading in what at the time was its narrowest range in history. Including the current period, there have only been four other periods since then where the trailing six-month range of the S&P 500 was less than 6%…While there are a number of theories as to what periods of low volatility mean for the market going forward, once the market breaks out of that narrow range, forward returns have been mixed, although there has been a positive bias. Six months later, for example, the S&P 500 was higher every time. Interestingly, in each of the four prior periods the S&P 500’s forward returns weren’t necessarily explosive to the up or downside.

Neither, of course, happened this week as the Dow Jones Industrial Average rose just 0.3% to 15,615.55, while the S&P 500 gained 0.1% to 1,761.764.

But that didn’t stop the prognosticators on either end of the spectrum from, well, prognosticating, sometimes from within the same shop. Merrill Lynch’s head of U.S. equity and quantitative strategy Savita Subramanian, for instance, said that the investment bank’s sell-side indicator was at a level that suggests the odds favor a rising market during the next 12 months, perhaps as much as 19%. Merrill Lynch chief investment strategist Michael Hartnett, however, said that if investors put another $8 billion or so of cash into stock funds during the next two weeks that “would trigger a contrarian ‘sell signal.’” The note was called “It’s Getting Frothy, Man!”

It’s possible both are right. Subrmanian is looking 12 months out and I suspect that Hartnett’s call is more tactical in nature. But both tap into the two biggest emotions in investing: fear and greed. And for most of us buying stocks because we’re hoping for a 1999-like run-up or selling because we fear a repeat of 2008′s financial crisis or the Dot Com Bubble is the worst thing we can do.

But this certainly doesn’t feel like a bubble, at least not the one circa 2000, when any stock with dot-com attached to their name surged on little more than a hope and a prayer. Say what you will about the over-priced Tesla–it at least has the chance to change the way we think about cars. You could never say that aboutPets.com or eToys.com.

In fact, as Barclays’ Barry Knapp notes, stocks are trading at about average multiple for the middle of a market cycle and what comes next will be determined by the future course of earnings. Knapp writes:

We’re encouraged by the acceleration in core earnings and top-line growth, which
has been apparent 80% into the current earnings season. However, 6% of earnings
growth falls well short of the mid-cycle trend we saw during the last two cycles, yet
the market is trading at an average mid-cycle multiple…

It seems clear to us the rally is less about fundamental earnings momentum and has more to do with the improved outlook for public and monetary policy and the U.S. economy…

The longer-term complexity involves dichotomy between the rates curve out to five years priced for a neutral monetary policy being nearly reached only at the end of 2018 while the risk premium of growth sensitive cyclical sectors has fallen sharply to normal mid cycle levels…

If growth remains below potential, equities are likely mispriced while the rates curve is not, if growth accelerates to above potential equities being reasonably priced but either the rates market is mispriced or Fed policy is too accommodative and either asset or price inflation are the inevitable side effect.

So what’s an investor to do? Maybe nothing. This is from the website of the Wall Street Journal’s Jason Zweig, and it’s probably the best advice for anyone who’s in the market, whether you’re a short-term trader or a long term investor:

…you don’t have to lose just because other people win, and you don’t have to win just because somebody else loses. You win when you stick to your own long-term plan, and you lose only when you let greed or fear goad you into changing that plan.

The right time to buy is whenever you have cash to spare. The right time to sell is when you have an urgent and legitimate need for cash. If you buy because the market has gone up, or sell because it has gone down, you are letting 90 million strangers rule your life with their greed and fear.

U.S. stock and bond markets prepared to reopen Wednesday after a two-day closure because of Hurricane Sandy. And the storm’s massive economic impact ($20 billion is one figure already being floated by observers) did not appear to be showing up in index-future trading. Earnings and announcements from European companies boosted stocks overseas. UBS (UBS) jumped 14% as it announced plans to cut 10,000 positions, and French oil giant Total (TOT) rose 2.9% after reporting strong earnings.

Dow futures rose 50 points; S&P 500 futures rose 6.3 points.

General Motors (GM) posted 93 cents of adjusted EPS, 33 cents ahead of the Street. Shares were up 4.6% in pre-market trading.

Stock index futures rebounded on Tuesday after falling more than 1% overnight, with the Dow ending the futures-trading session up about 8 points and the S&P 500 rising 3.5 points. The S&P/Case-Shiller index tracking home prices in 20 cities showed prices rose 2%, ahead of expectations for a 1.9% rise. European stocks climbed as Spain said its GDP contracted by 0.3% in the second quarter, a better result than expected. The Euro Stoxx 50 rose by 1.5%.

U.S. stocks will start trading again on Wednesday as the New York Stock Exchange did not appear to sustain crippling damage from Hurricane Sandy. “Our building and systems were not damaged and our people have been working diligently to ensure that we have a smooth opening tomorrow,” said NYSE Euronext CEO Duncan Niederauer in a statement. Because of the lack of damage, the exchanges won’t have to revert to a fully electronic system that they had planned to test on Tuesday.

Crude futures rose 0.4%, but remained under $86 per barrel. The hurricane is likely to crimp demand for a prolonged period, as millions remain without power.

We came into the third quarter knowing that this would probably be the worst quarter for major U.S. companies since the third quarter of 2009. Right now, S&P 500 earnings are on track to rise 1.1% year-over-year, based on results that were already reported through Thursday morning and expectations for results that will come out soon. That’s still the worst since 2009, but better than analysts had expected a few weeks ago, when they saw earnings falling about 1% year over year. Companies have beaten the (already depressed) analysts’ earnings expectations at a pace that matches historical trends, according to S&P Capital IQ.

“Of the 245 companies that have reported thus far for Q3, 153 have beat analysts’ estimates, 56 have missed and 36 have met. This produces a beat rate of 62%, in-line with the 10-year avg.”

And there are certainly some bright spots:

“Five of the ten sectors are anticipated to post earnings growth in the third quarter, with Financials (20.65%) and Consumer Discretionary (5.23%) leading growth,” says S&P Capital IQ. “The sectors that are expected to weigh down the index in the third quarter are Materials (-23.51%) and Energy (-15.60%).”

But there’s a bigger problem that this earnings season is revealing: revenue growth is still anemic, after rising just 1.9% in the second quarter. So far this quarter, S&P 500 have posted 1.2% revenue growth. During the recession and immediately afterward companies boosted profits through cost cuts and higher productivity. In Q4 2010, profits jumped 37% on just 10% revenue growth, the Boston Globe notes. But those kinds of gains only last so long.

While earnings have been generally “uninspiring,” revenue has been surprisingly weak, wrote Jason Pride, Glenmede’s director of investment strategy.

“Revenue results have missed by a much wider margin – 61% negative surprises to date,” he notes.

The Beige Book, like its namesake color, did not cause a thrill when it was released at 2 p.m. Stocks have continued their gradual descent, and the Dow was recently down 125 points, or 0.9%. The S&P 500 was down 9 points, or 0.6%. Weaker forecasts from Alcoa (AA) and Chevron (CVX) appear to be weighing on stocks.

The beige book, which surveys business owners and others around the country, indicated that most of the country is seeing “modest” growth.

“Reports from the twelve Federal Reserve Districts indicated that economic activity generally expanded modestly since the last report. The New York District noted a leveling off in economic activity, and Kansas City indicated some slowing in the pace of growth. In general, other Districts reported that growth continued at a modest pace.”

Spanish stocks and bonds are rising today on news that the country is close to requesting a bailout even as Germany has cautioned against it, and the news appears to be lifting stocks throughout Europe. The market wants more certainty on Spain, so the sooner the request comes in the better. Spain’s IBEX index is up 1.5% and the Euro Stoxx 50 index is up 0.6%.

U.S. futures are also pointed higher, with the Dow up 33 points and the S&P 500 up 6.5 points.

Fertilizer company Mosaic (MOS) is down 2.6% in pre-market action after earnings decreased 18% on falling phosphate volumes and prices.

Financials are showing early strength, even as New York Attorney General Eric Schneiderman sued JPMorgan Chase (JPM) over Bear Stearns’ mortgage securities. Bank of America (BAC) is up 1.2%. Analysts at Credit Suisse raised the sector to Overweight.

Boeing (BA) is trading about flat after an engineers union rejected a four-year contract offer.

This morning at 10:30 a.m. David Einhorn is scheduled to speak at the Value Investing Congress in New York. We’ll be there to report on it. If you missed it check on Barrons.com’s Stocks to Watch Today and Focus on Funds to learn what other top investors including Bill Ackman had to say.

In the near term, stock market action has been rocky, with the major indexes posting two straight weeks of losses. But the recent weakness was a mere bump on an otherwise smooth third quarter, as the major indexes continued to coast higher.

It was, of course, the quarter when central banks saved the day. Action by the Fed, the ECB, the Bank of Japan and others lifted risky assets throughout the globe even as economic conditions worsened.

The Dow ended the quarter up 557 points, or 4.3%, to close at 13,437. The blue-chip index has risen in 11 of the past 12 months.

The biggest gainers included Home Depot (HD), up 14%; JPMorgan Chase (JPM), up 13%, and Procter & Gamble (PG), also up 13%.

Home Depot has benefited from the recovery in the housing market, as well as its consistently strong performance come earnings time.

JP Morgan is trading right around where it closed the day before CEO Jamie Dimon revealed the bank’s large London Whale losses. Dimon’s steady performances in front of Congress and the company’s not-awful second quarter earnings report has helped it climb out of that hole.

Procter & Gamble rose after activist investor Bill Ackman took a stake in the company, whch was revealed in July. Ackman’s intentions are still not entirely clear, although some analysts like the idea of a restless shareholder prodding the lumbering consumer giant.

The S&P 500 ended the quarter up 78.5 points, or 5.8%, to end at 1,440.7.

Was everything up? Not by a longshot. Coal and steel continue to get pummeled as Chinese demand fades. And industrials have been struggling on weak global demand: Boeing (BA) ended the quarter down 6.3%. FedEx (FDX) fell 4.7%; and railroad company Norfolk Southern (NSC) was down 9.2%.

For a review of the quarter in ETF-land check out this post from Brendan Conway.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.